How tax category defaultation logic works in Financials for India?

How tax category defaultation logic works in Financials for India?
Financials for India has a 3 way tax defaultation logic and the same will work as below:

1. Users can attach the tax category for an item in Item category form and that item category has to be assigned in Supplier/Customer additional information form.
Here first 2 levels for defaultation will happen:
(a)First level, system will check for item category attached at Supplier/Customer + Site level and tax category for that item category will get defaulted.
(b)Second level, System will check for item category attached at supplier/Customer + null site level and tax category for that item category will get defaulted.